SGX struggles to attract investors as trading values plunge

A turnaround is unlikely in upcoming quarters.

Singapore Exchange posted uninspiring results for 1QFY15. Its net earnings declined 16% year-on-year to $77.6m, while revenue slipped 8% year-on-year to $168.9m.

According to OCBC, the low figures were unsurprising given the ongoing plunge in the SGX’s securities daily average traded value (SDAV). SDAV has been on a downtrend since the first quarter of 2013, moving down from S$1.7b to S$1.0b by the latest quarter.

“The drag came from the Securities market, which continued to experience low trading activities. Securities daily average traded value (SDAV) fell 27% YoY to S$1.0b. For stocks priced below 20 cents, this plunged 66% to S$0.1b. This lacklustre trend is unlikely to get any reprieve in 4QCY2014 based on early Oct numbers,” noted OCBC.

In an attempt to boost its sub-par performance and lure more investors, the SGX has been intensifying its efforts to bring more activities to the local bourse.

“SGX has also introduced market makers and liquidity providers in Jun 2014 in an effort to increase liquidity and depth to the market. Next year, the standard board-lot size will be reduced from 1000 shares to 100 shares. On the operating side, management is expecting tech-related capital expenditure of between S$50-55m and guiding for operating expenses of S$330-340m for FY15,” stated the report.

Here’s more from OCBC:

SGX’s overall performance was fortunately mitigated by other businesses and Derivatives revenue now accounted for about 32% of total revenue.

Total volumes of derivatives contracts rose 9% to 28.8m in 1Q. The China index futures, the FTSE A50, accounted for 10.8m contracts during the same period.

Based on current market conditions and the lack of key Singapore market specific news, it was not surprising that the SDAV on the local bourse has been falling in the last four quarters. 

Recent efforts by the SGX to increase the profile of listed companies, attract more institutional interest and to explore more collaboration could over time bring in more activities onto the local bourse.